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Dynamic Planner: Financial advice increases risk tolerance and confidence during adversity

Jessica Bird

June 2, 2020

financial advice

Dynamic Planner has revealed initial findings around the effects of financial advice, from its long-term project into investor behaviour conducted in partnership with Henley Business School.

Survey participants were shown hypothetical scenarios where they experienced a market crash and a decline in their pension values.

Almost six in 10 (58%) respondents who had experience of financial advice were concerned, while 25% were still optimistic about their financial situation.

Of those without experience of financial advice, 74% were concerned and only 12% were optimistic.

Individuals who had worked with a financial planner were also more comfortable with financial risk; 13% were in a medium-high risk level and 21% in a low-medium risk level.

Only 7% of those with no experience of financial advice were in a medium-high risk level and 43% in a low-medium risk level.

The differences in risk tolerance levels were apparent despite the impact of COVID-19 on market volatility.

However, the study also found that respondents who took part in the survey after the real-life market crash as a result of COVID-19 had lower levels of confidence in their abilities to manage their finances and higher levels of negative emotions.

Louis Williams, head of psychology and behavioural insights at Dynamic Planner, said: “The findings so far show that, generally, those who had worked alongside a financial planner were more resilient, had higher levels of positive emotions and self-esteem, were more confident in their abilities to manage their finances, more conscientious and emotionally stable, and were better able to regulate their emotions.

“It might be the case that such individuals with these positive emotional attributes may be more likely to seek financial advice rather than developing these qualities as a result of engaging with a financial planner.

“But the evidence does demonstrate that there are important individual differences.

“In fact, when controlling for factors that may lead to seeking financial advice and having higher levels of these resilient characteristics, such as age and wealth, we continue to observe the emotional wellbeing benefits of having experience with a financial planner.

“Such qualities of stability and resilience are what we desire to promote and develop within all investors in order to face periods of adversity with confidence.”


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